Europe's economic revolution is forcing manufacturers to look
at their marketing opportunities in a new way. Six predictions about the
future.

For many years I resisted the concept of the global brand. The
diversity of language, taste, and customs seemed to me insurmountable
barriers to the worldwide marketing and advertising of brands. This
certainly seemed true for H.J. Heinz Co. Our company is global, but much
of its success is based on the consolidation of distinct regional
operations catering to local tastes and customs.

Of course, the Heinz label in known and respected worldwide. It is
particularly strong in the United States, the United Kingdom, Canada,
and Australia. More recently, Heinz has become a potent brand in Japan,
Korea, and China. But 65% of our annual sales come from products that do
not bear the Heinz brand. In the U.S., we are known also for Weight
Watchers meetings and foods, StarKist tuna, 9-Lives cat food, and
Ore-Ida frozen potatoes. An Italian may know us by our Plasmon baby
food; a Spaniard by our Orlando brand of tomate frito; a Frenchman by
our Petite Navire tuna. In short, Heinz is a world brand, but it is to a
greater extent a world of brands.

At first, this situation made me quite skeptical about the notion
of the global brand. But subtle, profound revolutions in technology and
culture have begun to transform consumer attitudes. They also have
caused me to rethink my earlier prejudice against the global brand
concept. I would maintain that the communications revolution and the
convergence of cultures have now set the stage for truly global
marketing. In many respects, the age of the global brand is at hand.

From a financial perspective, Heinz is a company with substantial
resources and ample margins. We can employ those resources to spend back
on our big brands and support their growth. But how and where we choose
to do that spending remains the question of the moment. Marketing has
become an almost hydroponic exercise. Exact amounts of nourishment applied directly at proper intervals can produce substantial yields in
practically any environment. But one needs the proper vehicle, or
vehicles, to make this process work.

My thesis is that there is such a vehicle today that is at once
powerful enough to cover immense areas, and personal enough to reach the
individual consumer. That vehicle is satellite/cable television. It is a
technology that is changing all the rules of global advertising. For
those with sufficient resources and resolve, it is the premier
instrument for building global brand power.

But what exactly is brand power? The skeptics among us might regard
the phrase as a hollow promise. That is an understandable observation
but one that I think ultimately cannot be sustained. I believe brands do
have power, which we can discern and even measure. When successfully
marketed, they can become international symbols of significant import.

We must keep in mind what brands are. The truly great brands are
far more than just labels for products. They are symbols that
encapsulate the desires of consumers. They are standards held aloft
under which the masses aggregate. Brands can extend beyond national
boundaries if they symbolize universal desires. Or they may have a more
segmented appeal to certain age groups or occupations in a number of
nations.

Coca-Cola is certainly among the true branded gentry, the pantheon of brands that have become citizens of the world. It is instantly
recognizable as a product for the masses. Its appeal comes from the
taste of its product. But it also comes from what this brand represents.
It symbolizes youth, vigor, convenience, refreshment. Despite its
longevity, this brand is forever contemporary. It is an element of the
modern lifestyle and, to a great extent, the American lifestyle. To
consume it is to be at one with the spirit of the age.

An impression of a different sort is conveyed by Mercedes Benz. The
Mercedes symbol is respected around the world, even by those who cannot
afford the product. Status, quality, and precision engineering are the
hallmarks of this brand. Gucci is another great status brand that
entices consumers of all economic strata.

An electronic soft drink

The Japanese have a number of global brands that mix technical
quality and reliability with affordable price. Sony, for one, has become
as much a symbol of Japan as the Rising Sun. When consumers think of
Sony, they think of the Japanese work ethic and single-minded devotion
to consumer satisfaction. The Walkman is an electronic soft drink:
convenient, contemporary, and universally appealing.

Global brands such as these are major achievements. But their true
power lies not just in their ethos. It lies in their ability to pioneer
new market opportunities in response to changing consumer tastes. This
is the case with many major brands. The discerning retailer must realize
that while local or private labels may help settle occupied territory,
the big brands make the initial assault. They use their power to inspire
consumer interest and demand, often whether the related products are
available or not.

The most dramatic example of this was the recent appearance of the
Golden Arches in Moscow. The opening of the Moscow McDonald's was
not just a new product launch; it was a social and cultural event of
international proportions. The attraction was more than burgers and
fries. It was the arrival of an American institution already well known
to Moscovites. The McDonald's brand had infiltrated Soviet culture
and generated an unstoppable demand for the product and what it
represents.

This may explain why major brands command such high multiples in
the marketplace. Major companies like RJR Nabisco Inc., Beatrice Co.,
and Grand Metropolitan PLC have paid premiums in the billions in order
to acquire major brands or to be acquired themselves.

In the case of great brands, familiarity breeds respect. The
imperative for the clever marketer is to cultivate brand recognition,
instill consumer trust, and motivate consumer desires.

Such motivation is now possible on a scale hitherto undreamed of,
thanks to the revolution in communications technology. The first test
case for this phenomenon was the U.S. During the '50s and
'60s, the great U.S. mass market was unified through television.
The juggernaut of TV advertising brought major brands to practically
every household. The media flood could not be contained by national
boundaries. Soon American television crossed into Canada, creating an
international television market.

While significant, this development was only the first step. The
advent of cable and satellite television has sparked a further media
explosion during the past decade. Over the past 10 years, the number of
local U.S. television stations has jumped from 622 to 1,446. With cable
and satellite transmissions, the number of channels available to U.S.
households has soared. The average U.S. household has 31 channels today
-- four and one-half times the European average -- and this is expected
to double by the end of the decade.

Equally important is the speed with which this phenomenon has
occurred. Barely 22% of U.S. homes were wired for cable in 1980. By the
end of the decade, the total had leapt to near 58%, on its way to 75% by
the year 2000. Communications technology has reached a critical mass,
and the momentum of its expansion is astonishing.

Critical mass is forming

The example of America is instructive for us here. Europe has been
denied a varied television menu for decades. One might compare
conditions here with that of the U.S. 20 years ago. But satellite/cable
technology is changing all that, and the critical mass is being formed.
At present, there are nine satellites beaming about 40 channels across
Europe. This number may increase to more than 100 by 1992. The addition
of another satellite is expected, with one-third of the European
marketplace receiving scores of channels by mid-decade.

For now, the audience is limited but the trend is clear.
Satellite/cable television is expanding public access to more varied
programming. The Netherlands may well serve as a paradigm for
Europe's TV revolution. Approximately 80% of Dutch households can
receive one or more of three German channels. About half can tune in
Belgian channels, 45% are able to receive Italy's RAI, while 28%
can get France's TV5. The BBC is at the low end, with 15%
penetration. In short, TV technology means viewing on an international
scale.

Nature and media abhor a vacuum. These new media outlets are
looking for programming, and much of it will be international. Thus,
consumers will not only watch advertisements for products, they will
also watch programs that are, in effect, advertisements for different
lifestyles. One can see this already in European broadcasts of American
hits like "Dallas," "The Cosby Show," and
"Wheel of Fortune." Television will further homogenize the
cultures of the developed world. It will in turn generate the
cosmopolitan aspirations best satisfied by global brands.

There is a parallel to this in the history of branded manufacturing
itself. Brand names became powerful as nations became developed.
Transportation technology combined with mass production to enable
manufacturers to reach national markets. Radio and television united
countries and homogenized their languages and cultures. The stage was
set for mass marketing of big brands.

A similar scenario is unfolding in Western Europe. The Single
European Act of 1992 is removing barriers to transportation and
commerce. The capacity for transnational production is available. The
final step in the process will be mass communication. And the technology
of satellite/cable TV will make that possible. The Euro-consumer is
about to emerge.

We can already see how communications technology has globalized
social and political trends. Instead of years or months, some events or
trends are echoed within days. Some are even simultaneous, such as Earth
Day. Indeed, the Green movement is a classic example of global
trendsetting. It is a powerful, if somewhat diffuse, philosophy with
subscribers on every corner of the globe. When StarKist in the U.S.
announced its dolphinsafe tuna policy, it became a national media event,
and other tuna manufacturers in Europe and Australia followed suit
within hours.

Another global trend of interest to us is the health and wellness
phenomenon. Fitness and nutrition have become international issues as
the developed nations get progressively older. Middle-aged spread is
part of the human condition. Therefore, health and wellness have become
issues of worldwide dimension within the past decade.

Consumerism is itself a trend with global momentum. Consumer
consciousness has begun to reach into what we used to call the Eastern
Bloc. Last March, the A.C. Nielsen Co. released a remarkable, pioneer
study of consumer attitudes in the German Democratic Republic. This
survey concluded that consumers in GDR know some important Western
brands better than they do brands from their own country. They even know
some brand names better than West German consumers do. Young GDR
consumers could spontaneously name many West German brands.

A vivid example of this pent-up demand has come with the collapse
of the Berlin Wall. From February 1990 (when Coca-Cola made its entry
into the GDR) until June, more than three millions cases of Coke were
sold to eager East Germans.

Such episodes convey the prospect of not just a Euro-consumer but a
global consumer. We may soon find that a German student has more in
common with a Canadian student or a Japanese student that he does with a
German businessman. The significance of consumer stratification across
national lines should not be lost on retailers, manufacturers, or
marketers. It has not been lost on Heinz.

The way I see it now, and in spite of my earlier skepticism,
manufacturers have a new method for leveraging certain of their brands
on a global scale, if they wish to do so. New television technology will
give them the means to produce a single commercial, dub it into several
languages, and beam it across one or more continents. Eurosport already
broadcasts athletic events in six languages. Why not do the same with
product advertising?

We have seen already how brands create markets. The process of
multi-channel mass TV marketing that has been developed in the U.S. will
be replicated and amplified on the European continent. Manufacturers
will take their big, global brands directly to consumers, who will in
turn seek them from their local retailers.

Heinz, with its ketchup and baby food, and Weight Watchers are
candidates for membership in the branded gentry. They can appeal to
those universal aspirations that mark the modern, global consumer. With
satellite/cable communication as their catalyst and passport, these big
brands will be ready to take their place as citizens of the world in the
decade ahead.

The communications revolution will overtake us whether we like it
or not. Consumers want more than price, because they see more than
price. They also want convenience. They want variety. They want
selection. They want quality. And they want to mimic lifestyles of other
countries with which they identify.

Protectionism is a waste of time and a futile waste of resources.
Whether its form is manufacturers seeking tariffs among nations or
retailers increasing slotting allowances, the erection of cost barriers
distorts markets and misallocates resources. This in turn thwarts
creativity and stifles innovation.

The markets in France and West Germany, in particular, have
developed certain restrictive retail distribution practices, which have
retarded the growth of consumer choice and -- let us not forget --
retail opportunities. Such trade practices reduce the range of choice
for the consumer. But they do not stifle the consumer's range of
desire. Thus, a contradiction is produced when the consumer becomes
global while the retailer remains nationalist for local profit reasons.

We should take to heart the example of recent history. We already
have seen the great political changes inspired by global communications.
The whisper of freedom in one country is heard a continent away.
Likewise, the aspirations of consumers in one country are shared by more
and more of their counterparts in the major markets of Asia, North
America, and Europe.

Six predictions

In sum, we cam make the following six predictions about the future:

1. We are unquestionably at the dawn of a revolutionary age in
communications.

2. Communications technology will globalize consumer aspirations
throughout the world.

4. Global social trends will feed consumer desires for global
brands -- the "McDonaldization" of the world is at hand.

5. Global brands will build and develop global market
opportunities.

6. Finally, and most importantly, manufacturers, and retailers must
stand ready -- not as adversaries but in a new spirit of partnership --
to satisfy the emerging needs of the global consumer.

Europe's economic revolution is forcing manufacturers of all
sorts to look at their marketing opportunities in a new way. In the
years ahead, a local perspective will not be sufficient; a European
perspective will be required. Spurred on by the communications
revolution, this European perspective will take an ever-stronger hold.
Europe -- rather than Germany, Britain, France, or Italy -- will be the
market. As the idea of Europe takes hold, it will represent another step
forward in the global progression of major brands.

The wall is down. Europe beckons. The global market lies just
ahead.

Dr. Anthony J.F. O'Reilly is Chairman, President, and Chief
Executive Officer of H.J. Heinz Co. This article is adapted from remarks
he made to a 1990 food industry meeting held in Berlin.

COPYRIGHT 1991 Directors and Boards
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